The Association of Financial Advisers (AFA) is canvassing members’ opinions on the new client opt-in and fee disclosure arrangements as it seeks to formulate its responses before the Government introduces legislation next year.
In doing so, the AFA has noted that some superannuation funds have moved ahead of the Government on the issue by demanding that advisers provide proof of client authorisation.
The AFA has used its weekly communication to members to remind them that Government signalled its intentions when the Treasurer, Josh Frydenberg, released the so-called Royal Commission Implementation Roadmap in August.
It said that Recommendation 2.1 on Annual Renewal and Payment was on the list for consultation to be completed and the legislation to be introduced to Parliament by 30 June 2020.
“This is a particularly important piece of legislation as it will impact many clients and will have a material impact upon the cost of providing financial advice,” the AFA said.
It said the key parts to the Government’s legislative approach were extending opt-in to all adviser service fee clients (not just post 1 July 2013 FOFA clients), reducing the timeframe to annual and also the expectation that authorisation will be provided to product providers.
“Activity is already happening in this space with some super fund trustees introducing requirements for clients to provide authorisation. It is also closely linked to issues with respect to charging fees from superannuation accounts,” the AFA said.
It said the exercise represented a good opportunity to have a close look at other issues such as problems and inefficiencies with the FDS and opt-in process and the requirements of the sole purpose test.
“Annual renewal is going to be problematic for lower fee-paying clients, and we do not want to see them become economically unviable as a result. A solution needs to be found so that financial advice remains accessible and affordable for everyday Australians,” the AFA said.